Top Reasons Why You Should Incorporate Your Business
Business owners often ask the question of whether they should incorporate their business. It is common for a business, especially a small business, to operate as a sole proprietorship. But what are some of the advantages of incorporating or setting up an LLC? While a sole proprietorship or operating under no legal business structure may seem “easier” or “more practical”, there are a lot of advantages to setting up an LLC or corporation for your business. You may have been asking yourself whether it is worth it to take this next step as your business grows. Here are some key benefits to creating an LLC or Corporation for your business today:
- Protection of Personal Life and Limited Liability. When you set up an LLC or corporation for your business, this creates a separate and distinct legal entity. This entity creates space between your business and your personal property and assets such as your personal bank accounts, residence, vehicles, etc. While operating as a corporation or LLC, your business enters into contracts, loans, and takes on debt under the name of the business, not your personal name. This protects you and your family in the event of disputes, litigation, or business woes. As a sole proprietor, your personal property could be at risk for the debts and obligations of your business. An LLC or corporation serves as a firewall between your business and you and your family’s personal life. As your business grows, so too does your need for the protections offered by an LLC or corporation.
- Name/Brand Protection and Legitimacy. When you incorporate or create an LLC, you can reserve the business name you have chosen for your company. Generally, a sole proprietorship provides no protection for a business name. You’ve worked hard for your business name and reputation, why not protect it? Client and other business owners want to work with established incorporated businesses. Referring to your business as a corporation or LLC, and even simply adding “LLC” or “Inc.” to the end of your business name can help create instant legitimacy and standing for your company. This can also help in marketing your business.
- Potential Tax Advantages. With the passage of recent tax law changes, there are numerous potential tax benefits to consider when incorporating your business. Corporate tax rates can be lower than individual tax rates. Corporations and LLCs may also qualify for certain tax deductions not available to a sole proprietor. Both corporations and LLCs can deduct business expenses from their taxes. The new tax bill also created a significant deduction for certain business income for pass-through entities such as corporation and LLCs. There is a new flat tax rate under the new tax law for corporations that may be less than what you are paying as a sole proprietorship. You should consult with an accountant to discuss more about how incorporating your business may benefit you from a tax standpoint.
- The Cost to Set Up and LLC or Corporation. While setting up an LLC or corporation may seem like a daunting task, you may be surprised that the cost involved is relatively low when compared to the instant key benefits and advantages you receive. Deciding to incorporate or set up an LLC may be one of the best decisions you make for your business this year. We would be happy to meet with you to discuss the steps necessary to incorporate your business today.
If you need help with a business related matter, or help setting up a corporation or LLC for your business and would like to schedule a free initial consultation, please call our office at (615) 956-7938 and one of our attorneys can help with your business needs.